Auditor in the clear over collapse of Lehman

Ernst & Young has been cleared of any wrongdoing in its auditing of Lehman Brothers in the run-up to the investment bank’s near-catas- trophic collapse four years ago.

The Big Four auditor was under investigation by the Financial Reporting Council’s disciplinary unit for suspected misconduct relating to its scrutiny of whether Lehman Brothers was properly protecting clients’ money in the months before it failed.

Lehman Brothers’ crash in October 2008 precipiated the biggest financial crisis in decades. It also sparked a wave of complex litigation when it emerged that there was a shortfall in the pool of money that the bank’s European operations held on behalf of customers such as hedge funds.

The FRC’s investigation into Ernst & Young centred on what the accountancy firm…